Will my wife get a state pension increase if I die before she does? Agony Uncle Steve Webb replies

Married people often contact Steve with questions about what will happen to their pensions after they die, out of concern about how much their spouse will have left to live on under those sad circumstances.

This week, he replies to a reader who wants to know whether his wife's state pension would increase if he died first, on the basis of his own National Insurance contributions.

Steve Webb: Find out how to ask the former Pensions Minister a question about your retirement savings in the box below

I am 77 years old with a fixed yearly annuity of £10,378.20 plus protected rights of £928.15. The protected rights increases by 3 per cent yearly.

I also have a weekly state pension of £144.87. My wife has a weekly state pension of £74.69 and no other income. In the event of my death my wife will receive half of my annuity which I assume will not include the protected rights portion.

I should stress at the outset that what follows relates to people, such as yourself, who are covered by the ‘old’ (pre April 2016) state pension system. The inheritance rules under the new state pension system are much less generous, and I deal with this point at the end.

From the figures that you have supplied, I would assume that your own state pension has two elements – a full basic state pension of £119.30 per week, and an earnings-related additional pension of £25.57.

The first thing that would happen in the event of your death is that your wife would be able to claim the equivalent of a full basic state pension based on your record of contributions.

This is known technically as a ‘Category B’ pension or more informally as a ‘widow’s pension’. This would immediately increase the rate in payment from her current £74.69 to £119.30.

Your wife would also be able to inherit a percentage of the ‘additional’ or SERPS pension which you are receiving. The exact amount which a widow or widower can inherit depends on the date of birth of the person who has died, as shown in the following table. The Government has more information on this here.

WHAT SERPS YOU INHERIT BASED ON A HUSBAND OR WIFE'S AGE

Man’s date of birth

Woman’s date of birth

Maximum % of their SERPS you can inherit

5 October 1937 or before

5 October 1942 or before

100%

6 October 1937 to 5 October 1939

6 October 1942 to 5 October 1944

90%

6 October 1939 to 5 October 1941

6 October 1944 to 5 October 1946

80%

6 October 1941 to 5 October 1943

6 October 1946 to 5 October 1948

70%

6 October 1943 to 5 October 1945

6 October 1948 to 6 July 1950

60%

6 October 1945 and after

6 July 1950 and after

50%

As you have said you are 77, I am assuming you were born in 1939. From the table this means that your wife can inherit either 80 per cent or 90 per cent of your SERPS pension, depending on your exact birth date.

Unfortunately, it is not quite as simple as taking (say) 90 per cent of your SERPS pension.

This is because your SERPS pension is actually the difference between two numbers – the gross SERPS pension you would have got if you had never been contracted out, and something called a ‘contracted out deduction’ (or COD for short) to reflect the fact that some of your NI contributions went to provide your own pension rather than building up a state pension.

The way it works is that your wife would inherit 90 per cent of your gross SERPS pension but only 50 per cent of your COD. Without knowing the fine detail of your pension calculation it is hard to estimate the exact figure, but the good news is that your wife is likely to end up with more than 90 per cent of your current SERPS figure. In other words, she should get more than 90 per cent of your £25.57, or £23.01.

Adding this to the full basic state pension of £119.30, would give her a total pension of at least £142.31, an increase of around 91 per cent on her current rate.

On the other hand, you should be aware that if a small part of the £25.57 is not in fact a SERPS pension but comes from the old Graduated Retirement Benefit scheme or the new ‘State Second Pension’ which was introduced in 2002, only 50 per cent of these parts of your pension can be inherited.

WHAT ARE THE NEW STATE PENSION RULES FOR MARRIED WOMEN?

Steve Webb explains the previous NI payments system for married women and how it's changedhere.

Given the complexity around these transitional arrangements you may wish to contact the Pension Service in writing to ask exactly where your wife would stand.

For those who are receiving the new state pension, the rules are much less generous. With the exception of the special rules for widows who had paid the ‘married woman’s stamp’ for an extended period, there is no inheritance of state pension rights where the person who died was receiving £155.65 or less.

However, where the person who has died was receiving more than this, the excess amount is known as a ‘protected payment’ and half of this ‘protected payment’ can be inherited.

To give an example, if a man comes under the new state pension and is receiving £165.65 per week, the first £155.65 is ignored, but the extra £10 is his ‘protected payment’. Half of this amount, or five pounds per week, can be inherited.

The thinking behind this is that under the new system the goal is for far more individuals, and for more women in particular, to build up a full flat rate pension in their own right, rather than needing to depend on claiming a pension based on someone else’s contribution record.

ASK STEVE WEBB A PENSION QUESTION

Former Pensions Minister Steve Webb is This Is Money's Agony Uncle.

He is ready to answer your questions, whether you are still saving, in the process of stopping work, or juggling your finances in retirement.

Since leaving the Department of Work and Pensions after the May 2015 election, Steve has joined pension firm Royal London as director of policy.

Steve will do his best to reply to your message in a forthcoming column, but he won't be able to answer everyone or correspond privately with readers. Nothing in his replies constitutes regulated financial advice. Published questions are sometimes edited for brevity or other reasons.

Please include a daytime contact number with your message - this will be kept confidential and not used for marketing purposes.

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Will my wife's state pension rise if I die before her? Steve Webb replies